As consumers increasingly demand food that is both locally sourced and more nutritious, Controlled Environment Indoor Agriculture (CEIA) has an important role to play in our future food system.
By growing close to urban consumers, produce gets from its point of harvest to tables faster. Shorter travel distances mean less waste happens in transport, and food arrives fresher and more nutrient dense. This style of growing also uses far less water, but consumes far more electricity. Getting to scale with production involves intensive data science to manage return on investment and produce high-yielding crops.
As part of the research for our new report, “Bringing Digital Intelligence to Indoor Farming,” I sat down with Fresh Box Farms CFO and Vice President of Strategy Dave Vosburg to discuss the key metrics used to manage operations in this nascent industry. Fresh Box Farms is an indoor hydroponic farm growing fresh produce for the Boston metro area, and Vosburg had some illuminating answers to my questions about what matters to his company.
MICKI: Starting an indoor farm has a high upfront capital expenditure (CAPEX) for a structure, automation equipment, lighting, etc. What are the most important factors, from your experience, in managing the CAPEX cost to increase your ROI?
DAVE: The biggest key to getting a return on the upfront CAPEX is the density in which you can grow. We look at this as CAPEX per plant site. In other words, maximizing the number of plants that you can grow in 1 cubic foot of space. If one company grows for 25% of their competitor’s CAPEX/plant site, they can buy four times the capacity with the same capital and will turn over that capital four times as fast.
MICKI: You seem to be advocating that modularity is best because you can reduce contamination risk, keeping problems contained. However, doesn’t it vastly increase your CAPEX cost, because lighting, sensors, and control systems have to be repeated for each module?
DAVE: There is more CAPEX in the construction of the walls that separate the modules. However, since basil grows optimally at 75 degrees and romaine at 55, we achieve 20% plus yield advantages by doing so. So we believe these costs are very worthwhile. We don’t need any additional lights than if we grew in one big room. We don’t require additional sensors/control equipment, unless someone is only measuring temperature in one area of their farm, which would be silly.
MICKI: In states that have lower energy rates for agriculture, are these really subsidies that have an end date?
DAVE: These are ongoing policy subsidies. Massachusetts, where we grow, has always had a 10% discount for agriculture for electricity, for example.
MICKI: I agree with you that it makes that grower less likely to innovate on energy efficiency (which is the key to really scaling this industry), but is doesn’t it give them an advantage in getting to profitability faster?
DAVE: You are correct that the subsidies would give an advantage to a farm to achieve profitability faster, if the population in that locality was a willing purchaser of premium greens. So far I think there is little correlation between the states that give very big subsidies and avid lettuce eaters. But it’s possible. We also believe in local, so we wouldn’t centralize our operations in Georgia, for example, and export to the East Coast.
MICKI: In your experience, how much of what U.S. growers are building in automation already exists in The Netherlands? (I ask this because I’m going to be presenting to the minister of agriculture for The Netherlands.) Are there opportunities for Dutch companies to sell their automation systems here?
DAVE: I don’t know! From looking at YouTube videos I would say most exists, but perhaps not in the exact construct we need it in for how we operate. So it needs to be modified. I want to visit the Netherlands so I can see first-hand, however, so trip plans are being made! I am sure there are opportunities for the Dutch to sell modified versions of what they do here.